Nationwide Mut. Ins. Co. v. Barton Solvents, Inc.

• Decision Date: 01 October 2014
• Docket Number: No. 26956.,26956.
• Citation: 855 N.W.2d 145
• Court: South Dakota Supreme Court
• Parties: NATIONWIDE MUTUAL INSURANCE COMPANY, Plaintiff and Appellant, v. BARTON SOLVENTS, INC. and Citgo Petroleum Corporation, Defendants and Appellees.

855 N.W.2d 145

NATIONWIDE MUTUAL INSURANCE COMPANY, Plaintiff and Appellant

v.BARTON SOLVENTS, INC. and Citgo Petroleum Corporation, Defendants and Appellees.

No. 26956.

Supreme Court of South Dakota.

Argued on Aug. 6, 2014.

Decided Oct. 1, 2014.

Mitchell A. Peterson, Justin T. Clarke of Davenport, Evans, Hurwitz & Smith, LLP, Sioux Falls, South Dakota, Attorneys for plaintiff and appellant.

Michael F. Tobin, Gary J. Pashby of Boyce, Greenfield, Pashby & Welk, LLP, Sioux Falls, South Dakota, Attorneys for defendant and appellee, Barton Solvents, Inc.

William C. Garry of Cadwell, Sanford, Deibert & Garry, LLP, Sioux Falls, South Dakota, William S. Booth of Eimer, Stahl, Klevorn & Solberg, LLP, Chicago, Illinois, Attorneys for defendant and appellee, Citgo Petroleum Corporation.

Opinion

ZINTER, Justice.

[¶ 1.] A.H. Meyer & Sons, Inc. (A.H. Meyer) owned and operated a honey and beeswax processing plant that exploded. The explosion was caused by heptane vapors that were ignited by an electrical switch in the plant. Nationwide Mutual Insurance (Nationwide) paid for the damage and filed suit seeking subrogation from the supplier and the manufacturer of the heptane. Nationwide pleaded causes of action for strict liability and negligence premised on the theory that the defendants failed to adequately warn of heptane's dangers. Nationwide also pleaded causes of action for breach of express and implied warranties. The circuit court granted the defendants' motion for summary judgment. We affirm.

Facts and Procedural History

[¶ 2.] A.H. Meyer produced honey and beeswax at its plant in Winfred, South Dakota. A.H. Meyer was owned by Jack Meyer, Jr. (Jack) and J.B. Meyer (J.B.). J.B. took over operations from his grandfather, Jack Meyer, Sr. Barton Solvents, Inc. (Barton Solvents) marketed, sold, and distributed heptane, a highly volatile and combustible solvent manufactured by CITGO Petroleum Corporation (CITGO).

A.H. Meyer used heptane in its beeswax rendering process. Barton Solvents sold heptane to A.H. Meyer for over twenty years and had observed A.H. Meyer's plant on at least one occasion.

[¶ 3.] Barton Solvents delivered the heptane to a 10,000 gallon tank located outside the plant. The heptane was then pumped and stored in a “kettle,” a 150–gallon storage tank, inside the plant. Because liquid heptane would occasionally spill from the top of the kettle and vaporize, A.H. Meyer installed a ventilation system in an attempt remove the heptane vapors from the plant.

[¶ 4.] Barton Solvents provided A.H. Meyer with CITGO's Material Safety Data Sheet (MSDS) with each delivery.¹ The MSDS was a ten-page document that described the volatile nature of heptane, listed its potential hazards, and provided other warnings. The MSDS specifically warned that heptane liquid and vapor were “extremely flammable” and “may cause flash fire[s].” Right beneath that warning, the MSDS warned that the “[v]apor may travel considerable distance to source of ignition and flash back.” The MSDS therefore recommended that heptane be used only with “adequate” ventilation. The MSDS also warned that “[a]ll electric equipment should comply with the National Electrical Code.” The National Electrical Code (NEC) referenced many recommended practices of the National Fire Protection Association (NFPA). NFPA 497 contained recommended practices for flammable liquids, gases or vapors, as well as the location and selection of electrical installations in chemical process areas. By illustration, NFPA 497 recommended a five-foot distance between heptane and ignition sources such as standard (non-explosive proof) electrical switches. The recommended practices were to be applied with “sound engineering judgment.”

[¶ 5.] A.H. Meyer suffered two heptane explosions at its plant. The first explosion occurred in 2004. It was caused when a standard electrical switch, located four feet from heptane, ignited heptane vapors.² Jack Meyer, Sr. designed a new plant following the 2004 explosion. A.H. Meyer contacted Premier Engineering, Inc., an electrical and mechanical engineering company, for consultation as to what electrical changes needed to be made to the new facility to avoid another explosion. Premier Engineering told A.H. Meyer that standard electrical switches should not be within five feet of heptane. A.H. Meyer also consulted with the State Fire Marshall regarding risks of fire and explosion.

[¶ 6.] In the new plant, standard switches were installed a minimum of five feet from the kettle and five feet above the floor (because heptane vapor is heavier than air causing it to sink to the floor). Following reconstruction in 2006, a South Dakota State Electrical Inspector conducted a final inspection of the building. He indicated the building “was in compliance with South Dakota Laws and Rules and the National Electric Code.”

[¶ 7.] The explosion at issue occurred in 2009 when heptane spilled from the kettle and an A.H. Meyer employee pressed a standard switch to turn off a pump. Duane Wolf, a mechanical engineer, was retained as Nationwide's expert witness in this litigation. He concluded through experimental tests that the ventilation system A.H. Meyer installed possibly had the opposite effect that was intended:

it stirred up heptane vapors and moved them more than five feet to a point where they were ignited by the standard electrical switch.

[¶ 8.] Nationwide filed suit against Barton Solvents and CITGO on causes of action alleging strict liability, negligence, breach of express warranty, breach of implied warranty of fitness for a particular purpose, and breach of implied warranty of merchantability. All theories were directly or indirectly based on the contention that Barton Solvents and CITGO provided inadequate warnings of the dangers of the use of heptane.

[¶ 9.] Barton Solvents and CITGO moved for summary judgment. They argued that Nationwide failed to meet its summary judgment burden of identifying specific facts showing inadequacy of the warnings. The circuit court agreed with the defendants and granted summary judgment. On appeal, Nationwide contends that summary judgment was inappropriate because material issues of disputed fact existed with respect to the adequacy of the warnings.

Decision

[¶ 10.] Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” SDCL 15–6–56(c). “We view all reasonable inferences drawn from the facts in the light most favorable to the non-moving party.”Luther v. City of Winner, 2004 S.D. 1, ¶ 6, 674 N.W.2d 339, 343 (quoting Roden v. Gen. Cas. Co. of Wis., 2003 S.D. 130, ¶ 5, 671 N.W.2d 622, 624 ). “The nonmoving party, however, must present specific facts showing that a genuine, material issue for trial exists.” Hass v. Wentzlaff, 2012 S.D. 50, ¶ 11, 816 N.W.2d 96, 101 (quoting Saathoff v. Kuhlman, 2009 S.D. 17, ¶ 11, 763 N.W.2d 800, 804 ). “Entry of summary judgment is mandated against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Id. (quoting W. Consol. Coop. v. Pew, 2011 S.D. 9, ¶ 19, 795 N.W.2d 390, 396 ). A sufficient showing requires that “[t]he party challenging summary judgment ... substantiate his allegations with sufficient probative evidence that would permit a finding in his favor on more than mere speculation, conjecture, or fantasy.” Quinn v. Farmers Ins. Exch., 2014 S.D. 14, ¶ 20, 844 N.W.2d 619, 624–25 (quoting Stern Oil Co. v. Brown, 2012 S.D. 56, ¶ 8, 817 N.W.2d 395, 398 ).

Products Liability

[¶ 11.] Nationwide argues that the defendants were negligent and strictly liable because they failed to give adequate warnings of the dangers posed by A.H. Meyer's use of heptane. Nationwide contends that the warnings were inadequate because Barton Solvents knew of A.H. Meyer's use of heptane, A.H. Meyer complied with the NFPA 497 five-foot spacing electrical equipment recommendation, but the explosion still occurred. Nationwide contends that a disputed question of material fact exists regarding the adequacy of the warning.

[¶ 12.] Barton Solvents and CITGO concede that the explosion occurred even though A.H. Meyer complied with the five-foot spacing recommendation. However, they contend that Nationwide failed to identify expert testimony or any evidence indicating the MSDS, NEC, and NFPA 497 warnings were inadequate. They further contend that even though the electrical switch met the five-foot spacing recommendation, the mere fact of an accident is insufficient to prove negligence or strict liability.

[¶ 13.] Negligence in products liability actions involving inadequate warnings requires a plaintiff to “show that the manufacturer or seller failed to exercise reasonable care to inform those expected to use the product of its condition or of the facts which make it likely to be dangerous.” Jahnig v. Coisman, 283 N.W.2d 557, 560 (S.D.1979) (citing Restatement (Second) of Torts § 388 (1965) ; Dougherty v. Hooker Chem. Corp., 540 F.2d 174, 177 (3rd Cir.1976) ). “Strict liability arises when a manufacturer ‘sells any product in a defective condition unreasonably dangerous to the user or consumer.’ ” Burley v. Kytec Innovative Sports Equip., Inc., 2007 S.D. 82, ¶ 32, 737 N.W.2d 397, 408 (quoting Peterson v. Safway Steel Scaffolds Co., 400 N.W.2d 909, 912 (S.D.1987) ). A “manufacturer's failure to adequately warn render[s] the product unreasonably dangerous without regard to the reasonableness of the failure to warn judged by negligence standards.” Id. ¶ 35, 737 N.W.2d at 409 (quoting Peterson, 400 N.W.2d at 912 ). The product does not need to be defective itself. Id. (quoting Jahnig, 283 N.W.2d at 560 ). “Where a manufacturer or seller has reason to anticipate that danger may result from...